The recent directive of the Nigerian Financial Intelligence Unit (NFIU), on local government financial allocations has sparked tensions between state governors and council chairmen. CHIBUZO UKAIBE and GABRIEL ATUMEYI explore the issues
The Nigerian Financial Intelligence Unit (NFIU) recently shocked the nation by its new guideline which is supposed to go into effect on June 1, banning banks, governors, public officers, and other financial institutions/stakeholders from tampering with the statutory allocations of Local Government Areas from the Federation Account.
The announcement had been greeted by mixed reactions by different stakeholders in the polity. While some have lauded it for being a move in the right direction, others have kicked against it, citing illegalities.
Former governor of Akwa Ibom State, Obong Victor Attah, has described the new order of direct allocation to the local government as unconstitutional, that the development was like replacing one evil with another evil. That despite the ignoble conducts of the state governors, federalism doesn’t work with the federal government relating directly with local governments.
He said: “Governors give Chairmen pocket money so that they can go and keep quiet. This is completely and totally wrong because the local government is the closest tier of government to the people.
“It has obligations and responsibilities to the people and it was not being allowed to perform the functions in any way because its funds were being seized by state governments.
“But local government administration is purely and entirely the function of the state government.
“I am surprised (at the NFIU order) because Asiwaju Bola Tinubu was governor (of Lagos) with the Vice President Osinbajo as Attorney General when Obasanjo did that evil of seizing Lagos State local governments funds.
“All these things are wrong and they all boil down to the fact that we are not operating a proper federal system.”
The Senate on the other hand, last week threw its weight behind the financial guidelines for Local government of the NFIU, that the NFIU guidelines would reinforce the existence of the local government as an independent government established by the Constitution at the grassroots level with sovereign and elected officials. They resolved to urge all financial institutions to support the implementation of the new guidelines and the federal government to urgently fund the operations of the new NFIU.
They also urged the 36 state governments to fully support the implementation of the new NFIU guidelines while calling on state assemblies to hasten constitutional amendment as regards local government autonomy.
Similarly, a leading anti-corruption civil society organisation, Connected Development (CODE), commended the new policy saying it seeks to grant Local Government Areas (LGAs) financial autonomy and address gross misappropriation, corruption, money laundering, and security threats at the grassroots level.
Its chief executive officer, Hamzat Lawal stated that the policy would enhance the welfare of the people at the grassroots who are marginalised and discounted because funds meant for the development of their communities were diverted.
He said “For years, Federal and State Governments have maintained great influence and control over local governments, leaving room for embezzlement, mismanagement and financial leakages, denying Local governments the chance to make significant development impact and bring governance closer to the people at the grassroots.
“LGAs are entitled to a statutory allocation of national revenue for carrying out specific functions in response to local needs, but the Nigerian constitution gives the State governments power to handle issues hampering on governance at the local level. This has ultimately affected grassroots socio-economic development in the country.”
The NFIU has always existed in Nigeria dating back to its establishment in 2004 drawing its powers from the EFCC (Establishment) Act of 2004 and the Money Laundering (Prohibition) Act of 2004 (2011) but this is the first time it will be extending it’s focus on local government finance.
Financial independence and autonomy of the local government council in Nigeria has been virtually absent in the history of the fourth republic and discussions around it have seen tempers soaring. This important level of policy making and grassroot development has always been constrained by the constitutional provision of a joint state, local government account and the actual practices of the state governments.
The Nigerian public opinion seems divided between those who want to make the third tier of the government truly financially independent of the two senior and illustrious levels of government, and those who believe that the local governments do not possess the competence to manage finances coming straight from the federation account.
Many analysts believe that the local governments are ran entirely on the whims and caprices of the state governors, particularly judging by their elections and caretaker governments. Recently it was reported that Nigeria’s 36 states and the federal capital territory, Abuja, have pocketed or diverted over N15 trillion federal allocation meant for local government areas in the last 12 years, depriving the nation’s third tier of government funds desperately needed developmental projects.
Despite the multitude of political bigwigs that have added their voices to local government financial autonomy, the situation has remained the same, and that is because the state governors through the state Assemblies have always resisted this move. In 2017 and 2018 when the National Assembly wanted to amend the 1999 constitution to scrap the joint state/local government account, 27 state assembly refused to ratify the resolution, there depriving it the backing of the law. In this regard the state government seems to have always had their way until now.
Former President Obasanjo, though he couldn’t make it so during his term as president of Nigeria, but he had supported several efforts to make the local government council truly independent. He accused the state governments in the country of using the joint account to incapacitate and steal local governments funds.
He said, “When in 1976, we brought in Local Government Reforms, it was meant to be the third tier of the government and not meant to be subjected to the whims and caprices of any other government; just the same way that the state government is autonomous from the Federal Government. Local Government is meant to be autonomous from the state government.
“But from what we know, by design, most states have incapacitated the local government system. They have virtually stolen the local governments’ money in what they called Joint Account. They were to contribute 10 per cent but they (state governments) never contributed anything.
“So, what we have across the country are Local Government Areas that have functions, but cannot perform the functions. They have staff but most of them cannot pay the staff, and we keep getting excuses upon excuses.
Even incumbent President Muhammadu Buhari also favoured financial autonomy for the local governments, speaking in 2017, he said “Apparently, it is corruption that led to the relegation of the local government to the grips of the state government over the years thereby distorting and demeaning the real status of our federalism with regards to devolving governance.”
Governors Kick Back Against NFIU
As expected the Nigerian governors have rejected the new NFIU directive. The governors of the 36 states , acting under the aegis of the Nigeria Governors Forum , have also approached President Muhammadu Buhari on the actions taken by the NFIU , which they accused of dabbling into a matter that was “ beyond its mandate. ”
The chairman of the NGF, who is also the outgoing Governor of Zamfara State , Abdulaziz Yari, said the NFIU guideline is a brazen attempt to ridicule their collective integrity and show total disregard for the constitution of the Federal republic of Nigeria (1999) as amended.
The governors also drew the attention of the President to section ( 6) ( a) and ( b) of the Constitution, which confers on the states and the National Assembly the powers to make provisions for statutory allocation of public revenue to the local government councils in the Federation and within the states , respectively.
They added Section 162 ( 6) expressly provides for the creation of the States Joint Local Government Account into which shall be paid all allocations to the LGAs of the state from the Federation Account and from the government of the state.
Also speaking on the development recently, the newly elected chairman of the Nigerian governors forum, Ekiti State Governor Kayode Fayemi faulted the new financial guidelines describing the directive as playing to the gallery. That the imposition of the guidelines on states amounted to a recourse to a unitary system.
He said: “It is a directive designed to play to the gallery, it is unconstitutional and unenforceable. I have nothing to fear because during my first four years and now that I’m back, I acted only as a conduit for LG funds passed through us.
“ But the more fundamental issue is that NFIU just want to promote unitarism via the backdoor and undermine our two tier federalism.
“ I’m not suggesting that some governors don’t misbehave, neither am I saying your story of N100 billion is not true (even though I have my doubts), my own point is where there are infractions, it should be dealt with on a case by case basis and not tar everyone with the same brush.
“The truth is that most states subsidise their local government areas, rather than steal from them.
”In Ekiti, I can tell you that after meeting all the first line charge of salary payments the local government areas are hardly left with up to N50m on a good month to cover all other expenditure for all the 16 local government areas – security, running costs, capital development etc. The state is then left to carry the can of all additional expenditure – mend the roads, fix the drains, build the palaces, town halls, schools, health centre’s etc.
“I’m sure the same is true of many other states. So, really where is the N100 billion to steal out of local government funds in any state? I don’t believe it. It’s just a case of calling a dog a bad name in order to hang it and let NFIU provide Nigerians with independently verifiable evidence.”
But, sensing that they have an edge in the evolving saga, the National Union of Local Government Employees (NULGE) called on President Buhari to ignore the petition written by the Nigerian Governors’ Forum seeking to stop the implementation of the recent guidelines by the Nigerian Financial Intelligence Unit on local government funds.
The national president of NULGE, Ibrahim Khaleel, in another petition written to the President by the National Executive Council of the union, said the guidelines from NFIU was a bold move to end financial recklessness by governors feasting on funds for the 774 local government areas.
The NULGE president said the letter by the union to the Presidency was in response to an earlier petition by the outgoing chairman of the NGF, Governor Abdulaziz Yari, of Zamfara State to President Buhari accusing the NFIU of dabbling into a matter it had no mandate over.
He said as local government employees who had been victims of the financial ‘maladministration and recklessness’ by the state governors, nothing in the guideline indicates that the federal agency was desirous of encroaching on the responsibilities of any of the two other tiers of government.
The petition read in part,” Our considered opinion is that it is the governors who have been ganging up to prevent the wishes of the people of Nigeria to guarantee financial administrative autonomy for the third tier of government.
“We call on Your Excellency to ignore the petition of the governors who are behaving like wounded lions because they see the source of the funds which they have habitually misused and abused drying up. You standing firm with the downtrodden people in the grass roots, who have endured avariciousness of the governors over the years, will send the desired message to all that you will consolidate and win the battle against corruption.”
Local governments weren’t always at the mercy of state governors financially. The power play ahead of the 2003 general election had created the joint account with which the state governors oversaw the finances of the councils, even though council chairmen at the time defaulted mostly on their responsibilities of paying primary school teachers as well as attend to primary health care needs.
Still, the move to clip the wings of the council chairmen was expedient for the state governors at that time because the local government chairman who were constantly having meetings with then President Olusegun Obasanjo at the presidential villa, became quite powerful for the governors to control.
Having established such control over the finances of the councils, governors have since resorted to appointing caretaker council chairmen for purposes of meeting running cost of the council but much more as positions of leverage during elections.
This is so as governors appoint their political lieutenants into such positions.
As such the view in some quarters is the move to grant autonomy to local governments, might be tied to plots to weaken the influence of governors in states. With the move to also make State Assemblies financially independent in the offing, the governors have a collective battle in the days ahead of 2023 general elections.
Nevertheless, the raging debate renews the political intrigues that trails the managemment of local government funds.
Speaking to LEADERSHIP Sunday, public affairs commentator, Mr Jide Ojo said freeing local governments financially is a step in the right direction and a creative way to tame the unbridled tendencies of the state governments.
He said “The joint state local government account is a creation of the constitution, section 162, but saying that does not preclude or should not preclude local government autonomy. If you look at section 162, sub section 6, 7 and 8. Particularly sub section 8. A state assembly is supposed to make law for the redistribution of this account. Now, a newspaper talked of about over 12 trillion naira which has accrued to the state governments, that is what is meant for the local governments, which has been pocketed by the states. Is that not the promotion of corruption?
“If you say that a local government is recognised as a third tier of government and because the federal government wants you to take care of the local governments in terms of supervisory role, you now decided to usurp their responsibility and pay yourself from local government account without even allowing the account to be credited directly by the federal government. That is wrong.
“The fact that there is a joint state local government account should not preclude transparency and accountability and in my own estimation, that is what the NFIU guideline was targeting. That look, the money meant for local government should go directly to their account. That they cannot have more than five hundred thousand cash withdrawal per day and any subsequent payment should be done through the cheque book or through electronic transfer.
“If the state governors are creative enough they can get that, Section 162, sub section 8, you can see that a clever and creative governor would get the state house of assembly to pass a law in fulfillment of the provision of section 162 subsection 8 to be able to redistribute the funds of the local governments.
“The point is the aberration of spending on behalf of the local government needs to stop. What has been going on over the decades is that state governors have been spending on behalf of the local governments. As they are muscling them, they are not making them to be accountable. You will see a state that would say they have done roads on behalf of the local government. They have done parks on behalf of the local government. They have paid primary school teachers and workers in the primary health sector as well as local government employees. At the end of the day, there is nothing left for local government to run independently and that is an aberration. That can never be the intent of having a joint/state local government account.
“In fact, in addition to the federal allocation, states are supposed to commit a percentage of their annual budget to funding the local government. What happened to that?
“Right now, what happens is that whatever comes from the federal goes into this state local government joint account and is redistributed to fund the illegal local council development authority. The reason I use the word illegal, is because most of them are creations of the state governments and not listed in the constitution as to be able to enable them get monthly subvention from the federal government.
“The supreme court said much as it would not be illegal to have state create local council development areas, the remain inchoate until there is a constitutional amendment and listing by the national assembly. That was the Supreme Court decision 2001/2002 on the creation of LCDAs by the Lagos state government. Because of which Obasanjo seized the funds going to the local governments because of the creation of 37 LCDAs . Now many states have gone ahead to establish the LCDAs , which are funded from the redistribution of funds coming to the state local government joint account.
Professor Kabir Isa of the Department of local government and development studies, Ahmadu Bello University, said there is nothing constitutional about it, the NFIU is just a body monitoring the transfer and receipt of money to curb corruption and funding of criminal acts. But it still seems like a step in the right direction much more still needs to be done.
He said, “It is important to state that this is not the first attempt at monitoring revenue to local government. For a very long time, in about 1989, the then federal military government came up with a document called the F.M, the Financial Memorandum and it has about eight parts and it is a document that deals with local government estimates, local government finances, local government accounts, treasury administration, store management and the entire gamut of the local government financial system.
“However, after the then military administration left and gave way to politics, like what happened in 1979, the politicians felt that the military document was a federal might imposition on state governments. So in large part the document was not used when states where making laws for local governments.
“Remember that section 7, of the 1999 constitution, in the second part says accordingly, the states shall make laws in terms of the structure, function, composition, establishment, finance of the local government before the local government can exist in the state. The spirit and letter of that , is that the states were supposed to use this document and lay out the financial activities, and accounting procedures of the local government system but most states rather pick the aspects that fits them and jettison the rest. This isn’t the first time. In 2003, the then Obasanjo government established the eleven man technical committee under the late Etsu of Nupe, Ndayako, who passed on the mantle to the late Liman Ciroma who succeeded in submitting the report to Obasanjo before he passed out.
“What was the outcome of the technical report? It led to a bill being passed by the executive to the national assembly and then it passed through the usual processes and Obasanjo assented to the bill as monitoring revenue allocation to local government act 2004 but because the Lagos , Abia and other states took the federal government to the supreme court in terms of revenue accruing to the federal government. The supreme court judgement of 2006 nullified the act of parliament and restored the status quo because the constitution, section 162, sub section 2,3,4,5 up to 8 talks about allocation to the local government, to the states. Because it wasn’t the local government that took the federal government to court, rather it was the states that took them to court.
“Therefore, the Supreme Court judgment restored the status quo in terms of funds accruing to local governments but without that component of monitoring. So the Nigerian financial intelligence unit guideline is a welcome development to a certain extent and it is not limited to local government. I have read the act, it is also about monitoring insurgency financing or terrorism financing and it is at all institutional levels. It is not limited to local government, it is not limited to state or federal, in fact, it even cuts across the private sector. However, the monster of local government autonomy is hinged on the fact that revenue accruing to the local government from the federation account does not get down to the local government as expected.
“I was part of the eleven man technical committee, I supervised and superintended some states and if you look at the NOGATE document, of all the totality of funds that accrues to local government, only about 30 percent accrues to the local government from the federation account. States are indulged in the so-called joint project and of course, we know what elections are like at the state level, when the local governments are controlled by the states. So executives of the local government where they still exist, are executives that are handpicked in the guise of election. So they sing the song they are expected even when they go to the allocation committee.
“Recently, I did a project for the world bank and I went round selected states and we discovered that there is FAAC, that is the federation account allocation committee existing at state level but the funds does not truly accrue because the state governments create the so-called joint projects which fester and divert the resources accruing to the local government, therefore killing and preventing the local government from doing their jobs.
“This does not preclude the fact that there is no corruption in the local government. There are, because the local governments are supposed to have their own areas of fiscal jurisdiction, where they raise revenue and they are supposed to use this revenue to do projects but of all the 774 local governments, not up to two percent of them generate substantial internally generated revenue, therefore negating the fundamentals of internally generated revenue as well.
So this is a welcome development that we have a financial intelligence unit monitoring revenue accruing to local governments. It solves the problem only of FAAC, what is left is for the auditor general of the state for local government to do his duty of bringing the annual report to the state house of assembly, then of course at the local government level, there is what is called the audit alarm committee, they are also supposed to rise to the challenge and do their job with diligence.
Also speaking to Leadership Sunday, the executive director of Citizens Awareness Against Corruption And Social Vices Initiative (CAACASVI), Comrade Olumuyiwa Onlede disclosed that the organisation is totally in support of the NFIU guideline considering the high level of suffering imposed on local government employee and traditional rulers by state governors.
He said, “The policy will also allow head of local governments to know the actual financial strength of their various local councils and this will give them an insight on ways to tackle the numerous challenges directly with the funds allocated directly to them without state governor’s interference.
“When this policy comes to place, we advice the heads of local governments to seize this great opportunity to tackle the two prevalent issues confronting the Nigerian people at local level i.e. non payment of employee salaries and security of life and properties.
“As a civil society organisation, we are determined to always support government policies that is targeted towards alleviating the sufferings of the people. We believe President Muhammadu Buhari has commenced the genuine restructuring that is needed by our great country Nigeria,” he said.
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